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Ever heard of credit card churning? It’s when a person opens a credit card to take advantage of an offered bonus savings and then closes the account instead of using it long-term. The savings you get from that first purchase (or the free travel miles, or whatever offer) is tempting. Who wouldn’t want to save 20% or get 10,000 bonus travel miles? The only thing is, opening these lines of credit can lower your credit score. And if you are in the process of getting a mortgage, these new lines of credit can have some serious impact on your home-buying.

When my husband and I were purchasing our home, we contacted a cable television provider about getting service in our new house. It didn’t seem like a big deal until Team Neal contacted us after the credit inquiry showed up on our profile. We had to sign an affidavit promising that we had not taken on new debt. It didn’t affect our closing, but if something as simple as television service can affect the mortgage process, imagine the impact that buying a new car (or other major purchase) can have.

Whenever someone applies for a credit card, the issuer checks their credit before giving approval, something known as a “hard inquiry.” Every hard inquiry can lower your credit score by a few points. This can effect your mortgage because getting a home loan is a complex process. There are many factors that are taken into consideration when getting approved for a home loan: employment, income, and credit score, just to name a few. Your lender will also determine your income to debt ratio and you want your financial situation to look as good as it can so that you can get the best mortgage terms possible. You also want to keep your financial situation solid in the time that passes between getting approved for your mortgage and closing, which can sometimes last a month or more.

Here are some other things to keep in mind during the mortgage process: Making big credit changes can keep your loan from closing or delay it. Do not take out new loans or open new credit card accounts. Do not charge a large amount on your credit cards.

Mortgage lenders calculate how much you can afford to borrow with equations that rely heavily on your credit profile and score. If you open a credit card during your mortgage process, your credit score may go down, which can complicate or delay your mortgage. If you are in the process of getting a home loan or planning to get one in the near future, don’t enter into any financial contracts (like credit cards or loans) without first talking to your mortgage professional. If you have any questions or concerns, Team Neal will guide you through the mortgage process to ensure that you are taking the right steps to get the best loan options for your individual or family’s circumstances.

Determine how much you’ll need. Down payments generally range from 3% to 20% of your home’s purchase price, and the rest is your mortgage amount. So, contact us to find out the mortgage amount you qualify for. We’ll then explain your down payment options, so you can decide which option best fits your needs.

Calculate what you need to save monthly. Target when you’d like to purchase, which tells you how many months you have to save. If you’ve already set money aside, subtract that from the down payment amount. Divide this number by the number of months until purchase, and that’s what you’ll need to save monthly.

Open a separate savings account that automatically transfers from your checking account the monthly amount you need to save.

Track your spending. Carefully look at your credit card bills and checkbook to see where you can cut back non-essential expenditures, such as movies and meals out.

Acronyms are everywhere and in every profession. I’ve worked as an educator for nearly fifteen years and every school year we get brand new, cleverly-abbreviated terms: STAAR, TAKS, NCLB, TAAS (I bet you remember that one if you went to school in Texas in the 90s). The mortgage process is no different. When you begin to discuss loan types and options with your mortgage team, you’ll start to hear so many abbreviations that you just might begin to feel like you’re texting a teenager: FHA, FICO, MI. OMG, WTH?

During the home-buying process, the first acronym you’ll probably encounter is FICO. This refers to your credit score, something that is pretty critical when buying a house. I’ve written quite a bit about credit scores and repair; for more information, read some of my earlier posts.

FHA and VA are two acronyms that refer to loan types. FHA stands for Federal Housing Administration and is a mortgage program that is managed by HUD (there’s another one!). HUD stands for the Department of Housing and Urban Development, a part of the federal government. VA is a loan program for members of the military (U.S. Department of Veteran Affairs). There are also USDA (United States Department of Agriculture) loans for rural borrowers.

When considering mortgage options, there are also loan types with acronyms. ARMs (Adjustable Rate Mortgage loans) have changing interest rates (as opposed to fixed-rate loans). MI (Mortgage Insurance) is another term that may come into play when you’re purchasing a house.

If all this confuses you, consider yourself normal. The experts at Team Neal can answer all of your questions and walk you through every step of the process to help you make the best and most informed decisions about your mortgage. If you’re considering purchasing a house, give them a call and they can tailor a mortgage that is right for you. And they’ll do this while answering any questions that come up along the way.

What do a priest, therapist, and mortgage professional all have in common? Confidentiality. You can tell your priest and therapist anything (except that you are going to hurt someone or yourself) and they are ethically bound to keep it between you and them.

When you apply for a mortgage, it feels like you are getting very personal with your lender. Your mortgage agent will ask questions about your finances that you’re probably not used to being asked. Not the kind of stuff that friends casually discuss. Your mortgage agent will need to know details about your life because they are brokering a loan worth hundreds of thousands of dollars. But don’t worry-- the information you share with them is private. They will not share it, sell it, or (if you’re like me and have made some not-so-smart credit decisions in the past) judge you. They objectively look at your financial position and use the information to make an informed judgement about what kind of loan is best for you, how much of a mortgage payment you can support, and other details of what is quite possibly the biggest purchase you’ve ever made.

So what can you expect to be asked? First off, you’ll need to give information about your employment and income. Your mortgage team will need to know where you work and how much money you make, as well as how long you’ve been at that job and how steady the income is (salary? commission?). If your income is commission based or irregular, Team Neal is expert at tailoring a loan for you. When my family made a cross-country move a couple of years ago, we needed to purchase a house but we were both starting new jobs as teachers in the local school district. This complicated our mortgage process, but Team Neal was able to evaluate our circumstances and get us into our new home without any complications.

You’ll also need to discuss your debts. What debts do you have and how much are your monthly payments for automobiles, credit cards, etc.? Team Neal will use this information to determine a debt-to-income ratio that will inform their loan tailoring process. There will also be questions about savings and assets, and you’ll be required to provide copies of bank and brokerage statements. Finally, there will be questions about why you’re buying a home, how you’re going to use it (residence, rental, etc.) and how much money you plan on putting down. It is important to be forthright and honest so that your mortgage professional can determine the best loan for your needs.

I’ve made my fair share of bad decisions, and most of these I attribute to being young. I was twenty-two when I filed for bankruptcy and two years later, when my then soon-to-be (and now current) husband and I realized that it was time to buy a house, my credit score was 480. After a divorce, I had spent two years rebuilding relationships and atoning for my errors in judgement, but I neglected to consider rebuilding my credit. This left me with a credit score that labeled me as someone who was not to be trusted with money.

Still, somehow I was lucky enough to find Team Neal and make that fateful phone call. Rather than scorning me for being a terrible person with terrible credit, the mortgage professionals there gave me direction and helped put me on the path to good credit in just a few simple steps.

The first thing I had to understand was that just as I didn’t get myself into this situation overnight, I wouldn’t be able to repair it overnight. In fact, it took me about eighteen months of following their advice to rebuild my credit.

The Golden Rule of rebuilding your credit is: pay your bills! If you bought something or signed a contract for a service, pay for it. Nothing is free. If you’re spending more money than you’re making, it’s probably a good idea to look at where your money is going and develop a budget.

So I was paying all of my bills on time to rebuild my credit, but that wasn’t enough. What I really needed was to open a line of credit so that I could prove myself. Only problem is, with such a low credit score and not-so-stellar past, no bank was going to trust me with a line of credit. That’s when Amy at Team Neal told me how to open a secure credit card. The way it works is I give the bank money (not too much- I did $300) and they give me a line of credit (for $300) . I had to pay a monthly fee for this service, so it’s pretty much like I’m paying the bank to hold my money and give me credit because they don’t trust me. But after about twelve months of using this secure line of credit, I saw a big improvement in my credit score with my good payment history.

There were a few other pointers that Amy gave me about credit cards. One big one is to use the credit card to show activity, but keep your balance to credit line ratio at 30% (ie. if you have a $1000 limit, keep your balance at $300 or less). Another pointer is to not pay old collections without consulting your mortgage professional. If you do, it may make them seem current (remember your credit score is primarily based on the past twelve months).

These tips and strategies are what worked for me. For a customized strategy that is tailored to your personal situation, contact Team Neal. The sooner you begin, the better.

Here’s the thing about credit-- it’s a system built on trust. It’s the same basic concept as personal relationships: if someone tells you they are going to do something and then they don’t do it, you lose a little bit of trust in them. With a little bit of grace, we can overlook these small transgressions every once in awhile, but if they become frequent enough, trust is eroded.

It’s also the same with no credit. When you first meet someone, you usually don’t distrust them (unless they’re super creepy and then always trust your intuition) but you don’t trust them either. Real trust is built on time and history, and if you have no credit, there’s no history there. If you’ve never borrowed money you’ve never showed that you can and will pay it back. It’s not a bad thing, but it’s not a good thing either.

While I am by no means an expert on credit, my personal experiences over the years have taught me a lot. My ex-husband had terrible credit when I met him (should have been a blazing red flag) and he wasted no time opening several lines of credit in my name. When I was 22, I decided to leave that disaster of a marriage and ended up filing bankruptcy. The house that we had bought together ended up in foreclosure within the year. When I called Team Neal two years later, my credit score was a whopping 480.

The credit rating system gives a person a numerical score based on how much they “trust” them. The credit rating scale runs from 350 to 850; any score under 600 needs work (under 500 is pretty horrible). Your credit score is primarily based on the past twelve months; the past twenty-four months are also considered. The better your credit score, the better rate you’ll get on your mortgage and the more options you’ll have.

All of this comes into play when you decide to buy a house because you are basically asking a bank to trust you with their money. They’ll loan you the money and you promise to pay it back. They don’t know you from Adam- this is where your mortgage professional comes into play. Of course, this is an oversimplification of the process and I am not a mortgage professional, so be sure to contact Team Neal if you have any questions. Credit can be tricky and the more informed you are, the better off you’ll be.

Living in an apartment used to be fun-- no unexpected maintenance costs, no yard work, a little bitty space to keep clean. When I was in college and just venturing out on my own, the idea of my own personal space apart from my parents was something that I aspired for. An apartment meant independence and offered a community to live in among other independent people like me. It was great.

But then I met a guy (who is now my husband) and we started thinking about the future. We started thinking long-term: children, pets, even school zoning. Suddenly apartment living wasn’t so attractive. We wanted more: a house in a good neighborhood with a good yard and friendly neighbors. American dream type stuff.

Could we even buy a house? After a not-so-well-thought-out marriage at nineteen years old that ultimately ended in a divorce and financial ruin, my credit was not so shining. My soon-to-be husband had no credit: something almost equally as bad. Would a bank trust us with a hundred-thousand of their dollars to buy a house with? We are both college-educated professionals with good, stable incomes, but we assumed that our past experiences (or lack thereof) with credit would mean that we were doomed to live in an apartment forever.

In spite of our misgivings about ever being able to purchase a house, I decided to make a phone call to a mortgage team. The worst they could do was confirm my fears, right? Boy was I wrong. To this day, I am so glad that I made that one phone call because it put us on the path to homeownership.

While we weren’t able to buy a house right away, the mortgage representative put us on a plan to get our credit into shape so that we could one day buy a house. While we weren’t able to buy a house that month or even that year, the tips and information that I learned put us on the right path. Under the guidance of a mortgage professional, I learned how to rebuild my credit, budget our money, and make sound financial decisions so that we could one day purchase and own a home.

We ditched the apartments for about twelve years now. Home ownership is the best. Sure, there’s the occasional unexpected expense like when our water heater died last month, but that’s okay because it sure beats living in an apartment. If you’re unsure about whether or not you can buy a home, I encourage you to make the phone call. Find a good mortgage representative that will take the time to help you. I recommend Team Neal in North Texas. That’s who put us on the right path and we’ve trusted them since I made that phone call twelve years ago.